Thursday, December 16, 2010

Stocks Rising into Final Hour on Less Economic Fear, Short-Covering, Lower Long-Term Rates, Seasonal Strength


Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Almost Every Sector Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 17.59 -1.95%
  • ISE Sentiment Index 190.0 +55.74%
  • Total Put/Call .83 +22.08%
  • NYSE Arms 1.17 -26.53%
Credit Investor Angst:
  • North American Investment Grade CDS Index 88.03 bps +2.08%
  • European Financial Sector CDS Index 146.11 bps +7.77%
  • Western Europe Sovereign Debt CDS Index 182.67 bps +.92%
  • Emerging Market CDS Index 215.43 bps +.57%
  • 2-Year Swap Spread 24.0 -1 bp
  • TED Spread 18.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .13% unch.
  • Yield Curve 281.0 -4 bps
  • China Import Iron Ore Spot $168.80/Metric Tonne +.18%
  • Citi US Economic Surprise Index +17.80 +3.5 points
  • 10-Year TIPS Spread 2.31% -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +79 open in Japan
  • DAX Futures: Indicating +3 open in Germany
Portfolio:
  • Higher: On gains in my Tech, Retail, Ag, Biotech and Medical long positions
  • Disclosed Trades: None
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades higher despite recent stock gains, rising eurozone sovereign debt angst, weakness in some key overseas markets and a plunge in (MA)/(V) shares. On the positive side, Gaming, Retail, Construction, Hospital, Biotech, Medical and Networking shares are especially strong, rising more than 1.0%. Healthcare-related stocks continue to trade very well. Lumber is rising another +1.97%. The -8 basis point decline in the 10-year yield in spite of today's mostly strong economic data may indicate yields are getting close to a tradable top. Gold is -.8% lower on the day. On the negative side, Homebuilding, Bank and Paper shares are lower on the day. (XLF)/(IYR) have underperformed again throughout the day. Copper is falling -.79%. Shanghai copper inventories are jumping another +5.61% and have risen +28.11% over the last 5 days. The Greece sovereign cds is climbing +4.49% to 973.55 bps, the Portugal sovereign CDS is rising +2.5% to 449.54 bps, the Italy sovereign cds is gaining +2.3% to 201.69 bps, the Belgium sovereign cds is increasing +2.36% to 207.06 bps and the Ireland sovereign cds is jumping 3.81% to 561.08 bps. The ongoing surge in the Euro Financial Sector CDS Index remains a big negative. Short/intermediate-term gauges of investor sentiment remain overly bullish, which is also a big negative. The AAII % Bulls fell to 50.23 this week, while the % Bears rose to 27.15. The Hang Seng Index and Spain's IBEX 35 continue to display technical weakness. US stocks remain extremely resilient, which is a large positive. If the S&P 500 can convincingly break above recent highs I will cover some of my hedges. I expect US stocks to trade modestly lower into the close from current levels on China inflation worries, profit-taking, more shorting and rising eurozone debt fears.

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